The former Governor of the Bank of England, Lord King, told radio audiences that, in effect, no human agency, certainly not the last Labour Government, was responsible for the economic crash from whose effects we have still not recovered. He told listeners:
I am not going to talk about individual parties’ culpability because I
think the real problem was a shared intellectual view right across
the entire political spectrum and shared across the financial markets
that things were going pretty well.
He continued:
There were imbalances – we knew things were unsustainable – but
it was not entirely obvious where it would come unstuck – and I
think that is something everyone shared, and the right thing is to
make it better for the future.
In the first of these paragraphs there is a faint glimmer of truth. The Tory party, then in opposition, did not make clear to the public that vastly increased public expenditure as and on the basis of largely illusory economic growth was a very dangerous recipe that would lead before long to economic hardship. Its leadership was too concerned with the latest polls to take a principled stand on anything and in this instance unprincipled politics was, in the long run, poor politics.
But it is surely one thing to be a poor opposition and another to be a poor government. It cannot be that an opposition is equally responsible with a government in power for ten years for what happens in that government’s tenth or eleventh year: unless, of course, no one is responsible for it.
And that, really, is the drift of Lord King’s words. He went on to claim that no country could have avoided the crisis, though in fact several did so, or at least came out of it very much better than Britain. ‘We as one country,’ he said, ‘could not have stopped the financial crisis occurring.’ In effect he was saying ‘We were all equally to blame or, in the alternative, no one is to blame.’
This is a confession without confession as it were. Is it a coincidence that Lord King spoke thus when it appeared Labour might win the next election? Was it a coincidence that he said something rather different before the last election, when the Tories might have won the then next election? Is it a coincidence that in the years leading up to the crisis and during the crisis itself, one of the major officials of the Bank of England
I remember thinking at the time that we were in an unsustainable bubble economy. I listened to the news on Radio 4 and there was an item about the booming economy followed by the announcement of the government’s latest deficit. At that moment it crystallised to me that running a deficit at the height of a boom meant that we were in trouble. Too obvious and simplistic for the clever men of Threadneedle Street and Westminster to spot.